A growing number of property investors are turning to alternative finance options to overcome tougher mainstream mortgage lending criteria and stress testing, helping to drive up gross annual bridging lending to £4.2bn in April, following post-Brexit falls in 2016, the latest West One Bridging Index has revealed.
The bridging sector in the UK has witnessed five-fold growth in lending since 2011, as property professionals have increasingly considered bridging a mainstream source of funding for property projects of all kinds.
In the final quarter of last year, smaller investors, many of which had stepped back from the market in the wake of the Brexit vote, made a return and demonstrated a significant and swift recovery in the market, partly because this form of short-term financing solution allows investors to complete property deals, as well as take advantage of the quick turnaround times and flexibility of lending criteria that bridging offers.
This trend has continued in Q1 2017, meaning that gross annual lending returned to growth, to rise 2.8%, and it is expected that steady growth will continue throughout 2017, although the market will still need to navigate some challenges ahead, including the recent slowdown in the UK housing market.
In addition, it is still unclear what effect Brexit will have. The market recovered quickly from the vote to leave the EU in June 2016, but the long-term effect of negotiations and the final deal for the UK represents a great unknown, which could cause some investors to act more cautiously.
Stephen Wasserman, managing director of West One Loans, said: “We’ve seen a rise in bridging loan volumes as investors turn to alternative finance. The increase among smaller investors fits with the overall picture of residential market growth despite a jitter at the higher end of the market.
“The drop which followed the shock referendum result last summer was quickly recovered and this gives us confidence as an increasing number of commentators moot a slowdown in the housing market. Indeed, we continue to predict that the bridging market will go from strength to strength.
“Market moves present an opportunity for investors and those looking to capitalise on this will be seeking out the financing needed to enable them to do so.”